The CDTFA interest rate on unpaid California tax liabilities is 10% per year for all of 2026, applied as a monthly factor of 0.00833 (roughly 0.833%) on the outstanding balance.1California Department of Tax and Fee Administration. Interest Rates The clock starts the day after your return’s due date and keeps running until the agency actually receives full payment. Extensions don’t pause it. Payment plans don’t pause it. The rate applies across the programs the CDTFA administers, including sales and use tax, fuel taxes, tobacco taxes, and cannabis taxes.
The 2026 Rates
The CDTFA publishes two rates: one for money you owe the state, and one for money the state owes you.
- Deficiency rate (what you pay on unpaid tax): 10% per year, monthly factor 0.00833
- Refund rate (what the state pays on overpayments): 4% per year, monthly factor 0.00333
Both rates hold for the January 1 through June 30 period and the July 1 through December 31 period. The deficiency rate has sat at 10% since July 2025, after briefly running at 11% from January 2024 through June 2025.1California Department of Tax and Fee Administration. Interest Rates
Note the spread. You pay more than double the rate the state pays back on refunds, which is worth remembering if you’re thinking about overpaying as a cushion.
How the Monthly Calculation Works
The CDTFA uses simple monthly interest, not the daily compounding the IRS applies. Interest is charged for each month or fraction of a month the balance is outstanding.1California Department of Tax and Fee Administration. Interest Rates
That “fraction of a month” phrase is the detail people miss. One day late is treated the same as a full month late for interest purposes. If you’re going to be late, being a day late costs the same as being three weeks late within that month.
The math is straightforward. Multiply the unpaid tax by 0.00833 for each month (or partial month) the balance is outstanding. On $10,000 paid three months and two days late, the CDTFA treats the delay as four months:
$10,000 × 0.00833 × 4 = $333.20
When a liability stretches across periods with different rates, each segment gets its own monthly factor. The CDTFA’s rate table lists the factor for every period going back decades, so the calculation is tedious rather than difficult.
When Interest Starts and Stops
Interest begins accruing the day after the original statutory due date for the return, whether or not you’ve filed.2California Department of Tax and Fee Administration. Sales and Use Tax Law – Section 6591 A filing extension buys you time on the paperwork and the late-filing penalty; it does nothing for interest on the unpaid tax.
For deficiencies that come out of an audit, interest reaches back to the date the tax should originally have been paid, not the date the CDTFA issues its determination. Same rule for jeopardy determinations.
Interest stops only when the agency receives payment. Mailing a check on the deadline doesn’t count; the postmark isn’t the relevant date. Plan for delivery time.
Interest During a Payment Plan
Installment agreements under Revenue and Taxation Code Section 6832 don’t freeze the balance or reduce the rate. Interest keeps accruing on whatever principal remains.3California Department of Tax and Fee Administration. Sales and Use Tax Law – Section 6832 Each payment cuts the principal, which cuts the following month’s interest. Paying as much as you can up front, even short of the full amount, saves real money over the life of the plan.
Interest the State Pays You
If you overpay, the CDTFA owes you interest at the credit rate (4% in 2026), starting on the first day of the calendar month after the overpayment.4California Department of Tax and Fee Administration. Sales and Use Tax Law – Section 6907 If the overpayment also triggered interest charges on the original return, those get refunded along with the principal.
Penalties and Fees That Stack on Top
Interest is separate from penalties, and both can apply to the same liability. The CDTFA imposes a 10% penalty for filing a return late and a 10% penalty for paying late. When both apply to the same return, the combined penalty is capped at 10% of the tax due for that period.5California Department of Tax and Fee Administration. Trouble Paying Taxes?
The penalty is a one-time flat charge. Interest keeps growing month after month until payment lands.
If you ignore collection notices, the CDTFA can add a collection cost recovery fee equal to the agency’s actual costs of pursuing the debt. This fee only applies after the agency sends a formal demand notice warning that continued nonpayment may trigger collection action.6California Department of Tax and Fee Administration. Fee Collection Procedures Law – Sec. 55211 Once penalties, interest, and collection fees stack, the total can outrun the original tax by a wide margin. Partial payments made early are the single most effective way to limit the damage.
How the Rate Is Set
Revenue and Taxation Code Section 6591.5 ties the CDTFA rate to the federal short-term rate published by the U.S. Treasury.7California Department of Tax and Fee Administration. Sales and Use Tax Law – Section 6591.5 For deficiencies, California adds three percentage points to that base. For refunds, the agency uses the base without the markup, which is why the credit rate is always lower.
The CDTFA recalculates every six months, with new rates taking effect January 1 and July 1. Because the federal short-term rate moves with broader conditions, the CDTFA rate can shift between periods. Check the agency’s rate table before making a large payment, especially when your liability spans multiple six-month windows.
Requesting Interest Relief
The CDTFA can waive interest, but the grounds are narrower than most people assume. General financial hardship isn’t one of them.
What Qualifies
Section 6593.5 authorizes relief when the late payment was caused by an unreasonable error or delay by a CDTFA employee acting in an official capacity, or by a mistake at another state agency collecting tax on the CDTFA’s behalf.8California Department of Tax and Fee Administration. Revenue and Taxation Code 6593.5 – Relief of Interest The taxpayer’s own failure can’t be the cause; the state’s error has to be.
Section 6593 provides a separate path for taxpayers affected by a Governor-declared disaster. If you’re in the declared emergency area, relief can cover the period the proclamation is in effect, and the CDTFA may grant it automatically without requiring a separate hardship statement.9California Department of Tax and Fee Administration. Sales and Use Tax Law – Section 6593
Section 6596 covers taxpayers who reasonably relied on incorrect written advice from the agency. To qualify, you must have submitted a written question about a specific transaction, received a written response, and then followed that advice. If the advice was wrong, you can seek relief from the tax, penalty, and interest. Documentation of the original exchange is essential.
How to File
Submit through the CDTFA’s online services portal by logging in, selecting the relevant account, and choosing “Submit a Relief Request” under the “I Want To” section.10California Department of Tax and Fee Administration. Request Relief Without online access, file paper Form CDTFA-735 (Request for Relief from Penalty, Collection Cost Recovery Fee, and/or Interest) by mail.11California Department of Tax and Fee Administration. CDTFA-735 – Request for Relief from Penalty, Collection Cost Recovery Fee, and/or Interest Attach supporting evidence: the written advice you relied on, proof you were in the disaster area, or documentation of the agency error. The CDTFA reviews the facts and sends a written decision by mail or through your online account.